Tax Planning
Tax Planning in Wentzville, MO. Tax liability refers to how much you owe in taxes to local, state, and federal entities. While taxes may be one of the two certainties in life, there are perfectly legal ways you can reduce how much you owe. Tax planning is also important for successful retirement planning. At Correct Capital, we work with local Wentzville, MO individuals, families, and businesses to find creative and time-tested ways to reduce their tax liability. Call Correct Capital's financial and fiduciary advisors today at 314-930-401(k), reach out online, or read the article below to discover how diligent tax planning can keep more money in your pocket both now and in the future.
Tax Planning for Wentzville, MO Individuals and Families
Diligent tax planning is essential for individuals and families who want to put more in their retirement accounts and afford them more money for both now and the near future. Ways to reduce your tax liability when tax planning in Wentzville, MO are:
- Standard Deduction vs. Itemizing —
The standard deduction is specific dollar amount that reduces the amount of income you are taxed on. In 2022 and 2023, that flat-rate is:
2022
- $12,950 for single filers
- $25,900 for married, filing jointly
- $12,950 for married, filing separately
- $19,400 for head of household
2023
- $13,850 for single filers
- $27, 700 for married, filing jointly
- $13,850 for married, filing separately
- $20,800 for head of household
If your deductible income is more than the above, you can count up each deduction you're eligible for individually. The drawback is that doing your taxes takes longer, and you will have to document why you are eligible for the deduction when you send your returns.
- Review Your Retirement Accounts —
Roth IRAs and Traditional IRAs differ in how your savings are taxed. Contributions to a traditional IRA may be fully or partially deductible, and you pay taxes on it when you withdraw it. Roth IRA contributions are not deductible, but the money grows tax free. Your age, income, and other factors will determine what may be better for you for your tax planning. For example, if you anticipate being in a higher tax bracket in the future, you can move money from a traditional IRA to a Roth IRA to pay taxes on the transfer, while allowing the money to grow tax-free.
If you have a 401(k) plan with your employer, you can choose to defer income from your paycheck and have it placed directly in your 401(k). You can contribute up to $20,500 to a 401(k) in 2022, plus an extra $6,500 if you're 50 or older. For 2023, you can deposit as much as $22,500 with an extra $7,500.
If you're have freelance income, there are also retirement plans available, such as a One-Participant 401(k) Plan, and you can deduct your contributions there.
- Tax-Loss Harvesting —
If you lose money on the sale of any stocks, bonds, or options, you can offset the amount of capital gains tax you would have to pay if other securities sold at a profit. This strategy is utilized more with short-term capital gains, as the tax rate is typically higher than long-term. The maximum deductible amount is $3,000 per year, but you may be able to deduct higher losses down the road.
- Consider Paying Next Year's Bills Now —
If you have unreimbursed medical expenses, you can write off those that exceed 7.5% of your adjusted gross income. You can also make deductions this year for property taxes if you pay early (and if your municipality allows it), pay for a kid's tuition or for career-boosting classes for you early in order to qualify for a Lifetime Learning Credit.
- If Married, Filing Jointly or Separately —
The IRS says that roughly 95% of married couples choose to file joint tax returns. It helps couples qualify for a higher standard deduction, as well as a variety of tax credits not available to single filers. But, if both spouses have substantial earnings, they may be in a lower tax bracket if they file separately. If one spouse has a lot of medical expenses, it may be preferable to file separately to qualify for the 7.5% threshold for unreimbursed medical expenses.
- Contribute to Charity —
You can deduct up to 60% of your adjusted gross income via charitable donations. Qualifying organizations include:
- Non-profit organizations that are religious, scientific, educational, or dedicated to the prevention of cruelty to animals and children
- Veterans' organizations
- A domestic fraternal organization operating under the "lodge system," as long as the donations are used for charity
- Cemetery organizations
- Any government entities, under the condition that the donations are meant to benefit the public
- Often, a Canadian, Mexican, or Israeli organization, under the condition that the organization would qualify as a charity under U.S. law
If you open a Donor-Advised Fund, you can get a tax reduction by putting money into it now, while still being able to wait to decide how the funds will get distributed down the road.
If you are older than 70½, you can make what's called a qualified charitable distribution by transferring up to $100,000 a year from a traditional IRA directly to a charity without having to pay taxes on it. If you are 72 or older, that transfer qualifies as your required minimum distribution.
When you use a knowledgeable financial adviser for your tax planning in Wentzville, MO|With the assistance of a financial planner in Wentzville, MO, they can help put more money in your pocket this year while also setting you up for a financially secure retirement.
Tax Planning for Wentzville, MO Business Owners
With prudent tax planning, business owners can keep as much of their profits as possible. Some things to consider when tax planning for your Wentzville, MO business include:
- Evaluate the Structure of Your Business —
A lot goes into the structure of a business, and tax planning should be considered. Structuring your business as an LLC, sole proprietorship, partnership, or S or C corporation will affect both your corporate and your individual tax rate.
- Assess the Retirement Plans You Offer Employees —
Offering your employees retirement plans, such as 401(k)s, 403(b)s, and other defined contribution plans is a great way to reduce your tax liability. The "SECURE" Act of 2019 offers new benefits for employers who offer certain retirement plans, so it's recommended to speak to a financial advisor in Wentzville, MO about how they may apply to your business.
a good idea if you and your employees are both higher-earning. While a business owner would have to contribute several hundred thousand dollars annually, the tax benefits are high.
- Consider Other Benefits For Your Employees —
Increasing your employees' wages can lead to higher employment tax costs. See if your employees would be willing to accept other benefits as part of their compensation, instead of just giving them a raise. Common fringe benefits include medical insurance, group life insurance, childcare assistance, transportation reimbursement, meals, sick leave, or continuing education reimbursement.
You can also set up accountable plans to reimburse employees for certain expenses like travel, meals, or entertainment without having to report them as employee income.
- Put Your Family to Work —
Children can work for you tax-free on income up to $12,000, and you can help kick-start their retirement savings through an account like a ROTH IRA. You can double your retirement plan contributions if your spouse work for the business.
- Have a Company Vehicle —
Depending on the specifics of your business, you and your employees may be able to use a company vehicle and deduct the transportation costs. You can make the deduction in two ways:
- Take advantage of the standard mileage rate to deduct 58.5 cents per mile (for the first 6 months of 2022) or 62.5 cents per mile (for July to December in 2022); or
- Document your actual expenses, like maintenance, registration fees, and gas, and figure out if your deduction would be more than the standard mileage rate
- Consider Tax Loss Carryforward —
If you're not able to make certain deductions this year, you may be able to carry them over into subsequent years. Common carryover deductions are a home office deduction, net operating losses, business credits, and capital losses.
Congress are always making new tax laws for businesses, or changing old ones. A key benefit of consulting with a knowledgeable Wentzville, MO tax planner is that they will work with you and your tax professional to discover if there are ways to strengthen your personal and business financial success.
Other services we offer in Wentzville, MO include:
- Succession Planning
- Fiduciary Financial Advisor
- Company 401(k) Plans
- ESOP Advisor
- Self-Employed Retirement Plans
- 401(k) For Small Business
- Small Business Retirement Plans
- Social Security Consultants Near Me
Tax Planning in Wentzville, MO | Correct Capital Wealth Management
At Correct Capital, our Wentzville, MO tax planners know how important the financial health of your family or business is, both now and in the future. That's why we give our I.O.U. promise; all the advice we give you will be independent, objective, and unbiased. With tax law always changing, it's important to put a team around you that will help, like your Wentzville, MO financial advisor, tax professional, and attorney. For help with tax planning, asset management, or any other financial needs in Wentzville, MO, call Correct Capital today at 314-930-401(k) or contact us through our website.
